Partnership Firm: Benefits,Procedure,Types,Features

Introduction

The partnership is one of the oldest forms of business format, where two or more people can come together to run a business & share profit or loss from that business. In other words, a partnership firm is a form of business in which a group of people, also known as partners, come together.

Joint Venture:- Joint venture is same as a partnership only difference it is formed for a short period or to complete a particular venture and on completion of the period or venture it automatically dissolved or may continue as provided in terms of Partnership Deed 

In this article, we will discuss…

• Benefits
• Issue in partnership
• Procedure to form a partnership
• Importance of Partnership Deed
• Why did Professional Advise importantly?

Benefits

You know two is always better than one and 1+1 happens to be 11, Apart from sharing their respective expertise partners can arrange the initial capital and can also share the responsibility hence make it really easy to tackle the initial hiccups.

Issue in partnership

The most important issue in partnership is a misunderstanding. Misunderstanding can be due to responsibilities, Profit Sharing or due to mutual mistake. The solution for the issue is to put every term & condition in writing. In the form of a deed which is generally known as Partnership deed.

Procedure to form a partnership

A partnership firm in India is constituted by the following steps:

1. Drafting of the Partnership agreement
2. Acceptance & signature of a partnership agreement
3. Registration of partnership deed
4. Application for PAN card for Partnership
5. The opening of Bank Account
6. Application for other required documents

Types of a Partnership firm:

Below are basic summaries of the main types of business partnerships.

• General Partnerships. A general partnership involves two or more owners carrying out a business purpose.
• Limited Partnerships.
• Limited Liability Partnerships (LLP)

Importance of Partnership Deed

A partnership deed is actually the return agreement regarding terms and conditions on which you run partnership. Now, most of the people ask us we are good friends or we are relative, We know each other why all this legal formality. The answer is simple till the time everything is going good no law is required, Issue arises when things turn bad. In partnership, the mutual trust and understanding are utmost important however these can change over time. The only thing which will not change is legal written documents, Partnership needs to turn out to be a life and relation saving when a friendship changes into enmity due to Money.

Distinct Features of Partnership Firm:

The specific features of the partnership firm are partnership attributes of commitment, coordination, and trust; communication quality and participation; and the conflict resolution technique of joint problem-solving.

Under the 1932 act of Indian Partnership Act, two companies or firms can come together to earn a profit.

Examples of partnership firm in India are Hindustan Petroleum, Mahindra and Mahindra, Maruti Suzuki Renault India.

Why did Professional advise importantly?

Partnership deed contains many provisions related to admission of a partner, Profit sharing, Dissolution, Retirement which need to be drafted as per mutual understanding. It also needs to ensure that all partners get a fair deal according to their capital and effort contribution. Further provision should be there to minimize future disagreement between the partner by covering maximum possible provisions and resolutions in case of conflict of interest.